International Workshop in “Geoenvironment and 229 Geotechnics”, September 2005, Milos island, Greece Comparing investment options in a lignite deposit exploitation project F. Pavloudakis and Ch. Roumpos Public Power Corporation SA, Greece M. Galetakis Technical University of Crete, Greece ABSTRACT The modelling process described in this paper was developed in order to assess the feasibility of various investments options for the exploita- tion of a lignite deposit located in the Prefecture of Florina, Greece. The model uses as evaluation criterion the net present value. It is based on the characteris- tics of the reserves and relates the decision mak- ing with numerous technical, economic and en- vironmental factors. The examined alternatives include the construction of a new thermal power plant at the mine-mouth, the fuel supply of al- ready existing power plants located at relatively long distances and the fuel exports in neighbor- ing countries. Moreover, the feasibility of post- poning the exploitation of the lignite deposit and preserving its reserves for exploitation in the future is also assessed. The paper also includes a short discussion about the environmental constraints related to the supply of lignite produced from Florina mines to power plants that were designed and constructed for burning fuel mixtures with dif- ferent quality characteristics. 1. INTRODUCTION The optimal exploitation of non-renewable re- sources, such as fossil fuel deposits, is always a multi-dimensional problem (Dixit and Pindyck, 1994). This is especially true in the case of the lignite deposits of Florina Prefecture, Greece. In the greater area of the existing lignite mines of Florina and at a distance that varies between 10 and 90 km there are seven thermal power plants with total installed capacity of 5,058 MW. At present, there is a lot of argue about the feasibility of constructing a second unit of 300MW in the power plant of Meliti, which is located nearby the mines of Florina. The doubts regarding the feasibility of such an investment are related to the limited information about the sufficiency of the exploitable lignite reserves. According to the data available so far, the re- maining exploitable reserves in concessions of private mining companies are 165 Mt while the reserves in the concessions of Public Power Corporation SA are varying from 115Mt to 150 Mt, depending on the average striping ratio (7:1 and 10:1 m 3 :t, respectively) that was used in the relevant calculations. The final decision regarding the exploitation of these deposits must be made taking into ac- count the uncertainties about the cost of mine exploitation, which are increasing as the de- manded from the power plants lignite quantities approximate the exploitable reserves. However, any effort towards the reduction of uncertainties must not lead to irrational exploitation strategies that left behind the difficult parts of the depos- its. In any case, as alternatives that may contrib- ute to the optimal exploitation of these deposits, the lignite supply to the existing power plants of Ptolemais and Bitola (FYR of Macedonia) must be investigated. 2. DESCRIPTION OF THE MODEL The main economical factors that determine the feasibility of a lignite deposit exploitation pro- ject are the investment costs of the mine devel- opment and power plant construction, the oper- ating costs of the mine and power plant, the en- vironmental protection costs and the electricity